Search form

Welfare Lessons from France

As France enters another week of urban rioting by Muslim and
African youth, there is temptation for Americans to simply sit back
and enjoy the spectacle. France is, after all, a country that never
tires of lecturing us about the failures of our society.

Yet we should give more careful thought to the uprising. There
are important lessons for U.S. policymakers.

American liberals often look fondly to the European welfare
state as a model for U.S. social policy. A typical low-income
family of four has much of its rent subsidized by the French
government and can receive more than $1,200 a month in various
government benefits. The unemployed receive more. There is a
universal national health care system and generous retirement
benefits.

Yet, despite all this, we now know much of France's Muslim
community lives in areas overcome with crime, poverty and
unemployment. And in no small measure the blame can be attributed
to France's prized welfare system. For, while French welfare
has made poverty more bearable, it has done little to promote the
ability of people to move up the economic ladder, improve their
lives and see a better future. It is a society in which the poor
are given much, but own little and are offered few opportunities
for self-betterment, a society locked in social and economic
immobility.

French unemployment has hovered around 10 percent for years, but
the unemployment rate for the rioting young people is well above 20
percent and in some immigrant neighborhoods tops 60 percent.
Overall economic growth is less than half that of the United
States.

Much of that economic malaise can be blamed on France's tax
and regulation systems. France's tax burden is one of the
highest in Europe — welfare states don't come cheap. The top
marginal income tax rate is 48 percent. When payroll taxes are
included, the French can pay as much as 65 percent of their income
in taxes. The top corporate tax rate is 34 percent. There is also a
19.6 percent value-added tax (VAT). Overall, taxes consume nearly
44 percent of France's GDP. And even this isn't enough to
pay for the French welfare state. France's national debt tops
68 percent of GDP, quite aside from the unfunded liabilities of the
French Social Security system — a debt some estimate to exceed 200
percent of GDP.

Moreover, French businesses are weighted down with regulations
and restrictions that make its labor market one of the industrial
world's most rigid. France's minimum wage is roughly double
that of the United States. The workweek is limited to 35 hours.
French workers are entitled to a minimum of five weeks of vacation
and 36 weeks of paid family or maternity leave, with additional
time off available on an unpaid basis. It is very difficult for
French companies to lay off or fire employees. Dismissals are
subject to stringent bureaucratic constraints. As a result, French
companies are extremely reluctant to hire new workers. On average,
the United States creates more new private-sector jobs in a month
than France does in a year.

At the same time, the generosity of French welfare offers little
incentive for the unemployed to look for work. The result is a
growing population of idle, disillusioned poor with little
connection to society at large.

Of course, we have seen similar effects much closer to home. In
the wake of Hurricane Katrina, we learned some $10 billion in
welfare spending had been pumped into Louisiana over the last five
years, yet New Orleans still had an enormous underclass unable to
deal effectively with the storm and its aftermath.

Katrina has now started a new American debate on how to address
the poverty that still exists in so many cities across America. As
President Bush said in his televised address from New Orleans, “As
all of us saw on television, there is also some deep, persistent
poverty in this region as well. … We have a duty to confront this
poverty with bold action.”

The president is right, but the important question is what sort
of bold action we should take. And here, France provides an
important lesson: A growing welfare state financed by ever-higher
taxes is not the answer.